Weyburn Inland Terminal has made a pre-emptive move to ward off a possible hostile takeover of the profitable independent grain company.
The Weyburn, Sask., company’s board of directors recently adopted a shareholders’ rights plan, commonly called a poison pill, to take effect Nov. 4.
The plan puts in place provisions that make it financially untenable for a company to attempt a hostile takeover.
Company president Claude Carles and chief executive officer Rob Davies said implementing the plan doesn’t mean the company is aware of, or expecting, a takeover bid.
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“I can assure you there isn’t anything like that,” said Carles.
“It’s not related to anything going on.”
One grain industry official with experience in takeovers expressed some skepticism, saying a poison pill is usually put in place for a specific reason.
“As a general rule, people don’t wake up one morning and for no reason put a shareholders’ rights plan in place,” said Brian Hayward of Aldare Resources in Winnipeg.
“It’s usually an indication the board of directors is concerned about something.”
Carles acknowledged WIT could be an attractive target while emphasizing he knew of no specific action.
“People are always looking to invest in companies that are profitable and I guess we have been profitable and operating here for 37 years,” he said.
In the year ending Dec. 31, 2008, WIT recorded an after-tax profit of $2.4 million on net operating revenue of $16.7 million and grain handlings of 353,000 tonnes, with low debt levels and a strong balance sheet.
The previous five-year average was a profit of $3.7 million on revenue of $14.3 million and grain handlings of 417 million tonnes.
“I would suspect some people keep their eyes on things like that and we could come on the radar screen at some point,” Carles said.
The company has for a number of years been looking at the possibility of adopting a shareholders’ rights plan as a precautionary measure, he added, and finally decided to go ahead.
“In this day and age, with the way the world is going, you never know what might happen,” he said.
“This will give us a comfort level so we can say, ‘this is in place to help us,’ if something like that should happen.”
Davies added that a rights plan provides a board of directors with time to respond to any unsolicited takeover bid.
Hayward, former chief executive officer of United Grain Growers and Agricore United, has experience on both sides of a takeover.
He said he has no knowledge of any interest in WIT but said even if the company was aware of something, it would be restricted in what it could say publicly.
Putting a plan in place takes time and money and isn’t entered into lightly, he added.
The introductory paragraph of WIT’s 31-page plan states that the purpose of the plan is to ensure that “all shareholders are treated fairly in connection with any takeover offer or bid for the common shares of the corporation, and to ensure that the board of directors is provided with sufficient time to evaluate unsolicited takeover bids and to explore and develop alternatives to maximize shareholder value.”
Shareholders will be asked to ratify the plan at the annual meeting in April.
Under the plan, if any party attempts to buy more than 20 percent of WIT’s shares without having first dealt with the board of directors, a provision is triggered that enables other shareholders to buy shares at half the price being paid by the takeover bidder.
Davies said to his knowledge a poison pill has never been activated in Canada. Its presence is enough to dissuade hostile bidders from proceeding.
The complete shareholders’ rights plan can be viewed on sedar.com. Click on company profiles, click on the letter W, scroll to Weyburn Inland Terminal, click on view and click on Oct. 8 document.
A copy can also be obtained from WIT’s office in Weyburn.
